Using credit cards to build financial well-being

Let's look at some of the benefits of using a credit card

Rewards - check. Protection - check. Convenience - check. A good credit card is an indispensable and powerful financial tool for many reasons. A credit card can help you enhance your financial well-being and smart credit card holders can earn money just by using their cards in the form of reward points. During times of financial uncertainty, plastic money can provide comfort, convenience, and security.

We will look at some of the benefits of using a credit card:

Smarter way to manage expense: With the wide array of credit cards available in the market today, there are many that come with zero joining fees and can be tailored as per one’s needs. Credit cards can be one of the best options to manage expenses by not denting your pockets. To ensure that you don’t stretch beyond your means, you can make big-ticket purchases on EMIs using credit cards with a 50-day interest-free credit window. Additionally, a card owner could also be eligible for a supplementary card for a family member. This way supplementary cardholders can also enjoy the special perks and privileges associated with the principal card.

Value for every penny: A credit card comes with a range of benefits. You likely know the benefits of domestic and international spends and on categories like dining, entertainment, shopping and fuel. Additionally, credit cards also give benefits on specific usages, such as travel, health, or education depending on your card. If you are a student going to college or a parent sending your child to study abroad, a student credit card can help you (and them) manage money and plan expenses more prudently. Similarly, some credit cards have health benefits and offer features like complimentary eye and dental checkups or unlimited consultations with a GP/specialist. Credit cards can also provide access to a variety of benefits, from complimentary domestic and international airport lounge access to 24/7 concierge services to exclusive events. Additionally, banks reward consumers for credit card spending with a variety of attractive reward points. You should choose cards whose reward points structure best suits your lifestyle and spending habits.

Convenience that caters to all needs: Life is unpredictable, and for some unexpected events you need immediate access to funds. Credit cards can be among your most reliable allies in an emergency when managed carefully. They can act as an emergency fund and allow you to pay even if you do not have enough money in your bank account, as long as the credit limit is not breached.

It is also safer than paying via cash. The contactless feature on most credit (and debit) cards today also allows you to make purchases of up to Rs 5,000 by tapping the card or smartphone on the terminal. Visa credit cards also have the advantage of being accepted worldwide i.e. in more than 200 countries and territories. You need not worry about running out of money and can pay for what you need with just the tap of your card.

Security and protection: While safety and security have always been of primary importance in digital transactions, the introduction of chip and PIN cards has reduced point-of-sale skimming as these cards have a small metallic chip with encrypted data, unlike magnetic stripe cards. Also, the RBI-mandated move to tokenisation will help improve payment success rates for e-commerce merchants in India in the most secure way possible.

Experience aspirational goals: One vital thing that the last two years of the pandemic taught people is to truly live life and indulge in life experiences. This is where a premium credit card will allow you to live your hobbies to the fullest. Whether it’s golf courses, sailing lessons, racing or football clubs, your card offers access to some of your biggest passions, in addition to gift vouchers for luxury brands. Some high-end credit cards also provide concierge services to make bookings for air tickets, hotel room reservations, restaurants or films.

Build credit history: One of the main and basic reasons for getting a credit card is to build a credit history. You must have a good credit score if you are planning to take a loan. Credit scores represent your financial health and your credit card history contributes to these scores. In more evolved markets, interest rates on loans/APRs on cards etc are linked to an individual’s credit scores. Hence, by using credit cards responsibly for a longer period, you build a better credit history, which in turn improves your credit score.

Owning a credit card can help avail of all the above advantages. They provide financial freedom to buy whatever you like, whenever you want, and that’s why they are one of the most preferred financial products. Learning how to use them wisely can help you get the maximum value out of them.

(The writer is the vice president and head of Business Development at VISA)